The Japanese Yen outperformed in overnight trade as a drop in Asian stocks drove demand for the regional safe-haven currency. The MSCI Asia Pacific benchmark index lost 0.5 percent, with the newswires citing ominous comments from the OECD warning a global recession could follow a failure to avert the US fiscal cliff as the catalyst.

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Soft Set of US Economic Data May Amplify Downward Pressure on Sentiment

The Japanese Yen underperformed in overnight trade as Asian stocks advanced, sapping demand for the go-to safe haven currency. The MSI Asia Pacific regional benchmark index added 0.4 percent. Newswires attributed the chipper mood to the outcome of a meeting of Eurozone finance ministers where officials seemingly cobbled together a deal on near-term funding for Greece. Chinese Industrial Profits grew 0.5 percent in the year to October, marking the first increase since December 2011, which likely reinforced positive sentiment.

Eurozone officials said they aim to release a €34.4 billion funding tranche to Greece in mid-December and announced a series of new measures meant to bring 124 percent of GDP by 2020 and “substantially lower than 110 percent” by 2022:

All eyes turn to Brussels once again as Eurozone finance ministers gather for yet another summit attempting to resolve funding for Greece. The sit-down will mark the third attempt this month to work out an arrangement that would cover the €10 billion price tag for extending Athens’ deficit-reduction deadline by two years. Possible options include reducing interest rates Greece will pay on bailout loans, raising the deficit target to 124 percent of GDP by 2020 (from the current 120 percent objective), asking the ECB to contribute funds its earned on Greek bond purchases, and/or arranging a debt buyback financed with rescue cash.

Euro-zone composite output has rebounded from a 3-year low in November, according to Markit’s first estimate of the Purchasing Managers’ Index. The PMI for composite output was reported at 45.8, slightly higher than expectations for the preliminary index to remain unchanged from October’s 45.7 composite output. A PMI below 50.0 indicates a drop in activity, and Euro-zone composite output has fallen for 14 of the last 15 months.

The PMI for manufacturing in the Euro-zone hit an eight month high at 46.2, thereby beating expectations for 45.6. The index saw services activity contract at the fastest pace in 40 months, according to the PMI, which came in at 45.7, and disappointed expectations for 46.0.

New business fell in the Euro-zone at one of the fastest rates since mid-2009. Sentiment dropped sharply in Germany, while improving slightly in France. Employment fell across the region for the eleventh successive month according to Markit.

UK retail sales declined at the sharpest rate in 6 months according to the UK Office of National Statistics. Retail sales (excluding auto fuel) in October were reported at -0.7% versus an expected 0.1% decline, and lower than September’s revised 0.5% rise in retail sales. Retail sales in October were 1.1% higher than October 2011.

The average weekly spending on UK retail sales in October was 6.8 billion Pounds, compared with 6.6 billion in September. Internet sales were 0.5% higher in October.

The U.S. dollar traded slightly higher versus the Japanese yen as the monetary base – the amount of money in circulation plus deposits at the BoJ – increased by 10.8 percent in October highlighting the central bank’s efforts to stimulate the Japanese economy while attempting to reach a one percent inflation target. During the monetary policy meeting on October 30, the Bank of Japan decided to increase its stimulus efforts by introducing an additional 11 trillion yen in asset purchases effectively increasing the bank’s balance sheet and pumping more money into the financial system with currency devaluation as one of the primary objectives.

The BoJ Minutes of the Monetary Policy Meeting on October 4 and 5 were released today mentioning policy official’s concerns the economy was “leveling off” and exports and industrial production had been “relatively weak”. One member noted it might be necessary to “exert influence on foreign exchange rates” when trying to find alternative ways to boost inflation.

After a trading week’s worth of declines, oil prices are finally steadying, helped along by bargain hunters and an escalation of Middle East tensions, most recently centered in Lebanon and Syria, but also now in Kuwait. Improving economic news from the U.S. and the Eurozone are also providing some price support, as combined they have revived investors’ hopes that the worst of the global economic slide might soon be over. London-traded Brent crude oil was trading higher at $109.53, while NYMEX-traded West Texas Intermediate crude was trading up at $88.84, slipping just a few pips from an earlier high.

The violence in Lebanon has intensified over the past month, leaving some analysts to believe that the Syrian violence and sectarian clashes have spilled across the border and intensified. In Kuwait, a geopolitical protest rally ended with more than a hundred casualties, and tensions are likely to escalate. Kuwait produces 2.9 million barrels of oil per day, and exports about 2.1 million and the country is home to the globe’s sixth largest oil reserve.

Analysts believe, however, that oil prices could drop over the next few weeks, despite price supports from the Middle East, with some expecting WTI to trade between $80 and $85 a barrel and Brent crude to slide to about $105 per barrel. Expectations of higher oil stock piles in the U.S. are also weighing on the outlook, and if realized will have been the third straight weekly rise. The Energy Information Agency will release its weekly report on U.S. inventories tomorrow.

On OpenBook, sentiment among traders for WTI oil is overwhelmingly bullish, with 97% of traders buying against only 3% selling. OpenBook trader S0116692 from Norway placed an order to buy when the price falls to $87.90 and recently gained 5.91% on a long position. The trader’s 3.2% allocation in oil has provided the highest gains in the portfolio at 14.5% over the past six months, while a CAD/JPY allocation of 2.2% earned 13.4% in the same period. As a major North American producer of oil, the Canadian Dollar is highly susceptible to movements in oil prices. The trader’s realized equity over the past quarter was 83.5%, an 27.3% for the last month.

Trader sumforex from Saudi Arabia has a number of short positions in oil currently open, and each of them is currently showing a gain. The trader, who is relatively new to OpenBook, has a 58.9% allocation in oil which has shown a gain of 22.6% over the past month; his realized equity since he started trading is 18.8%. As of this writing, the trader has 29 followers and 15 copiers.

Labor markets across Europe remain under pressure as governments implement harsh austerity measures in an effort to clamp down the sovereign debt crisis. The Euro-zone’s Unemployment Rate, perhaps the best gauge used to measure the real economic impact by the crisis, remained at an all-time high of 11.4% in August, data released today showed. Similarly, the Unemployment Rate in July was revised higher to 11.4% from 11.3%.

The disparities between Europe’s periphery and core are growing: Spanish unemployment increased to 25.1% in August; whereas the German Federal Labor Agency today reported that German unemployment held at 5.5%. Taking a step back and looking at the Unemployment Rates over the past few years, it’s clear that the economic situation in Europe is worsening: one-year ago, the rate was 10.3%; five-years ago, the rate was 7.6%.

Prices put in a Bullish Engulfing candlestick pattern above support at 1.2831, the 23.6% Fibonacci expansion, hinting a bounce may be ahead. Resistance lines up at a long-term falling trend line established from May 2011, now at 1.3125. A break above that initially targets 1.3283. Alternatively, a reversal through support exposes a rising trend line set from the July 24 low (1.2653) and the 38.2% Fib (1.2620). Overall positioning favors a bearish bias for now but we will opt to hold off on entering short until the series of higher lows traced out from the July 24 low is convincingly overturned on a daily closing basis.